PETALING JAYA: Bursa Malaysia’s benchmark index has hit the highest level in 15 months, even as local stocks face continued foreign selling that has crossed RM21bil year-to-date.
Analysts told StarBiz that the uptrend of the FBM KLCI could likely extend into next year and that it is driven by more than just window-dressing by government-linked investment companies (GLICs) and other local institutional investors.
The FBM KLCI closed at 1,671.29 points yesterday, its highest point since late-September 2024, as large-cap heavyweights tracked a broader pickup in regional risk-taking.
Over the past month, the index was up 3.3%. From its year-to-date low in early April, the FBM KLCI has risen by over 19%.
The rally is taking place despite persistent foreign outflows.
Net foreign selling of Malaysian equities year-to-date has surpassed Indonesia, Thailand, Vietnam and the Philippines.
iFAST Capital research analyst Kevin Khaw Khai Sheng said the market is being pulled by both window-dressing activity, the cleaning up of investment portfolios at the end of a reporting period, and an improvement in market fundamentals.
“It is highly likely both, acting as a short-term liquidity event that validates a longer-term structural trend.
“The current high could be year-end window dressing, yet it is also supported by a genuine fundamental story that next year is when Malaysia’s structural reforms finally start generating cash flow for listed companies,” he said.
Khaw retains a positive view on the consumer, technology and banking sectors next year.
For now, the buying by local funds has been concentrated enough to lift the headline index even without consistent foreign participation.
This fits the late-year playbook, where institutions often crowd into bellwethers to improve portfolio optics before books close, while also positioning for the next cycle.
Rakuten Trade’s head of equity sales Vincent Lau sees the same window-dressing impulse but added that it is being reinforced by improving sentiment going into next year.
“The strong FBM KLCI performance is due to window dressing as GLICs and institutional investors support local equities.
“But fundamentals have also improved and investors see a better year ahead as the United States cuts its interest rate.”
Whether that optimism turns into a sustained rally next year may depend on participation broadening beyond the index names.
Lau said: “We are also seeing some good signs in small caps although not broad based. The sentiment among large caps would eventually flow to small caps.”
He added that retail participation in local stocks should also improve next year.
Stronger and wider participation by retail investors would help to turn the current FBM KLCI uptrend into broad-based optimism for the bourse.
Year-to-date, retail investors were net buyers of local equities by only a marginal RM270mil.
In November, retail participation on Bursa Malaysia stood at just over 16%.
